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Budget 2007: Snapshot of KiwiSaver

Snapshot of KiwiSaver

KiwiSaver is part of a package of government initiatives designed to increase saving by New Zealand households.
It encourages a long-term saving habit and asset accumulation by those who want to enjoy more than a basic standard of living in their retirement.

What are we doing?

The original KiwiSaver model announced in Budget 2005 encouraged participation by offering:
• $1,000 kickstart from the government
• annual fee subsidy, and
• first-home deposit subsidy (for some).
In August 2006, the government also announced that matching contributions by employers (up to 4 per cent of gross salary) would be tax exempt.
In Budget 2007, the government has significantly enhanced the incentives to save through KiwiSaver by:
• providing a tax credit to savers that matches their contributions into KiwiSaver (or a complying superannuation fund) up to a maximum of $20 per week ($1,040 per year) from 1 July 2007, and
• phasing in compulsory matching employer contributions from 1 April 2008 as follows:

From Employer contribution
(as % of employee’s gross salary)
1 April 2008 1
1 April 2009 2
1 April 2010 3
1 April 2011 4

The government will provide employers with a tax credit that reimburses their contributions at a rate of 100 per cent, up to $20 per week ($1,040 per year) per employee from 1 April 2008.
How much is the government contributing?
How much the additional KiwiSaver incentives will cost depends on the numbers that join KiwiSaver and how quickly they do so. Budget 2007 invests:

$ million 2007/08 2008/09 2009/10 2010/11
Member tax credit 144 351 478 586
Employer tax credit 62 292 453 585
Additional KiwiSaver take up (kickstart, fee subsidy , etc) 97 50 75 43
Total 303 693 1006 1214

ENDS

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